Bloomberg News

Nexon Rises After Saying It May Buy Game Developers: Tokyo Mover

April 19, 2012

Nexon Co. (3659), the video-game maker that raised about $1.2 billion in Japan’s biggest initial public offering last year, rose in Tokyo trading after saying it’s in talks to buy smartphone and mobile-game developers.

Nexon gained as much as 4.1 percent to 1,567 yen, the highest level since listing in December, and traded at 1,548 yen as of 9:39 a.m., extending its advance this year to 40 percent. Japan’s benchmark Nikkei 225 Stock Average fell 0.2 percent.

“There are a lot of good mobile-game developers” being considered for acquisition in Japan, Nexon Chief Financial Officer Owen Mahoney said in an interview. He declined to name any targets or give other details about possible purchases for the maker of the “Zombie Misfits” game.

Nexon announced two investments in game companies in the past two months and is seeking acquisitions as it plans to introduce 20 titles including “MapleStory” and “Three Kingdoms 3D” for mobile phones this year, as users shift away from consoles. The company, founded in South Korea in 1994, targets a 17 percent increase in sales this year to 102 billion yen ($1.2 billion), it said in February.

“The push toward mobile is luring investors,” said Mitsuo Shimizu, an analyst at Cosmo Securities Co. in Tokyo. “It’s a great strategy as the market is sure to grow.”

Nexon gets about 90 percent of sales from games that run on personal computers. Users play for free and can purchase virtual goods that enhance the experience, a model also used by Zynga Inc. (ZNGA:US)’s “FarmVille” and “CityVille” on Facebook Inc. (FB:US)’s social-networking site.

Mobile Users

“The industry is moving in our direction,” Mahoney said at the company’s Tokyo headquarters April 18. “We’d like to buy teams in intellectual properties early in what we consider to be their total lifetimes and then grow them.”

The U.S. mobile-games market expanded 29 percent in the fourth quarter from a year earlier, the fastest-growing category of gaming purchases, based on data from NPD Group Inc., a Port Washington, New York-based market research firm.

Nexon is gaining users as players move away from dedicated devices, or consoles, to personal computers, tablets and mobile phones, Mahoney said. The company benefits from “the absolute same fundamental shift” as the publishing industry, where Amazon Inc. (AMZN:US) took customers away from bookstore operators with the Kindle e-reader, he said.

The games maker had cash and near-cash items of about 126 billion yen as of Dec. 31, up from 44 billion yen as of Sept. 30, according to data compiled by Bloomberg.

The company raised its stake in Sungnam, South Korea-based JC Entertainment Corp. (067000) to 22 percent and agreed to take a 20 percent stake in Seoul-based Moyasoft Co., it said in announcements in February.

Monthly active users averaged 80 million in the three months ended Dec. 31, the company said in February. Average spending per customer was 1,350 yen in the quarter, compared with 1,305 yen a year earlier, helped by an increase in users in China, Nexon said.

Net income will probably jump 30 percent to 33.5 billion yen this year, Nexon forecast in February.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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